NOTE 9 - STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE 9 – STOCK-BASED COMPENSATION

Stock Option Plans

At March 31, 2013, the Company had two shareholder approved stock-based compensation plans: the 1998 Employee Stock Incentive Plan and the 2008 Stock Incentive Plan. A total of 601,925 shares were authorized under all plans at March 31, 2013. The plans do not provide for the settlement of awards in cash and new shares are issued upon exercise of the options. The North Valley Bancorp 1998 Employee Stock Incentive Plan provides for awards in the form of options (which may constitute incentive stock options (“ISOs”) or non-statutory stock options (“NSOs”) to key employees) and also provides for the award of shares of Common Stock to outside directors. As provided in the 1998 Employee Stock Incentive Plan, the authorization to award incentive stock options terminated on February 19, 2008. Pursuant to the 1998 Employee Stock Incentive Plan there were outstanding options to purchase 51,930 shares of Common Stock at March 31, 2013. The North Valley Bancorp 2008 Stock Incentive Plan was adopted by the Company’s Board of Directors on February 27, 2008, effective that date, and was approved by the Company’s shareholders at the annual meeting, May 22, 2008. The terms of the 2008 Stock Incentive Plan are substantially the same as the North Valley Bancorp 1998 Employee Stock Incentive Plan. The 2008 Stock Incentive Plan provides for the grant to key employees of stock options, which may consist of NSOs and ISOs. Under the 2008 Stock Incentive Plan, options may not be granted at a price less than the fair market value at the date of the grant. Under all plans, options may be exercised over a ten year term. The vesting period is generally four years; however the vesting period can be modified at the discretion of the Company’s Board of Directors, and for all options granted after the fourth quarter in 2008 the vesting period is five years. The 2008 Stock Incentive Plan also provides for the grant to outside directors, and to consultants and advisers to the Company, of stock options, all of which must be NSOs. The shares of Common Stock authorized to be granted as options under the 2008 Stock Incentive Plan consist 549,995 shares of Common Stock reserved for issuance under the terms of the 2008 Stock Incentive Plan, consisting of 302,780 shares to be issued upon the exercise of options granted and still outstanding as of that date, 4,140 shares issued as stock awards and 243,075 shares reserved for future stock option grants and director stock awards at March 31, 2013. Effective January 1, 2009, and on each January 1 thereafter for the remaining term of the 2008 Stock Incentive Plan, the aggregate number of shares of Common Stock which are reserved for issuance pursuant to options granted under the terms of the 2008 Stock Incentive Plan shall be increased by a number of shares of Common Stock equal to 2% of the total number of the shares of Common Stock of the Company outstanding at the end of the most recently concluded calendar year. Any shares of Common Stock that have been reserved but not issued as options during any calendar year shall remain available for grant during any subsequent calendar year. Each outside director of the Company shall also be eligible to receive a stock award of 180 shares of Common Stock as part of his or her annual retainer paid by the Company for his or her services as a director. Each stock award shall be fully vested when granted to the outside director. The number of shares of Common Stock available as stock awards to outside directors shall equal the number of shares of Common Stock to be awarded to such outside directors. Outstanding options under the plans are exercisable until their expiration.

Stock-based Compensation

There were 114,234 and 75,408 options granted in the three month period ended March 31, 2013 and 2012, respectively. For the three month periods ended March 31, 2013 and 2012, the compensation cost recognized for share based compensation was $83,000 and $40,000, respectively. At March 31, 2013, the total unrecognized compensation cost related to stock-based awards granted to employees under the Company’s stock option plans was $1,724,000. This cost is expected to be amortized on a straight-line basis over a weighted average period of approximately 4.4 years and will be adjusted for subsequent changes in estimated forfeitures. The weighted average grant date fair value of options granted for the three month periods ended March 31, 2013 and 2012 were $9.53 and $6.25, respectively, based on the following assumptions used in a Black-Scholes Merton model.

	For three months ended March 31,
	2013			2012
Weighted average grant date fair value per share of options granted	$	9.53		$	6.25
Significant weighted average assumptions used in calculating fair value:
Expected term		6.32 years			6.49 years
Expected annual volatility		60	%		58	%
Expected annual dividend yield		N/A			N/A
Risk-free interest rate		1.38	%		1.40	%

A summary of outstanding stock options follows:

						Weighted
				Weighted		Average
				Average		Remaining	Exercise		Aggregate
				Exercise		Contractual	Price		Intrinsic
	Shares			Price		Term	Range		Value ($000)
Outstanding at January 1, 2013		248,822		$	29.40	7 years		$9.97-$103.10	$	492
Granted		114,234		$	16.80
Exercised		—
Expired or Forfeited		(8,346	)	$	63.32
Outstanding at March 31, 2013		354,710		$	24.55	8 years		$9.97-$103.10	$	1,089
Fully vested and exercisable at March 31, 2013		116,508		$	45.76	5 years		$9.97-$103.10	$	195
Options expected to vest at March 31, 2013		238,202		$	14.17	9 years		$9.97-$23.95	$	895

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock as of March 31, 2013. There were no options exercised during the three month periods ended March 31, 2013 and 2012.